AMFI board has turned down a request of distributors to allow tagging of ARN in direct applications. It may be recalled that with the introduction of the Direct Plan, the distributor has been cut out completely. It was argued that tagging would enable the advisor to get access to client records for the investments recommended by him/her so that they could monitor their client portfolios. In other words, distributors wanted their ARNs to be tagged in direct applications so that they could get the feeds of schemes they recommend to their clients.
In its board meeting held on December 21, 2012, AMFI board observed that tagging ARN would be a compliance violation. “Tagging of ARN for a transaction may tantamount to investment routed through distributor. The board, therefore, decided that the tagging of ARN in respect of applications received under direct plan would be a compliance violation,” stated the circular issued by AMFI to AMCs.
“Direct plans are for investors who come directly to the fund house so I don’t see the reason for allowing tagging of ARNs,” says the operations head of a bank sponsored fund house.
Direct plans were launched from January 2013.
“It is manageable with few clients. For instance, I recommend Quantum schemes because they share the data with me. If I recommend direct schemes of other fund houses I ask my clients to manually feed data in my online portfolio tracker system,” says Vinayak Sapre, a Mumbai based IFA.
Jimmy Patel, CEO, Quantum Mutual Fund says that 104 distributors are empanelled with them. “We are direct-to-investor fund house so we share data with distributors. Sometimes distributors’ clients want to invest in our funds so distributors empanel with us. Fee based advisors are also recommending our funds,” said Jimmy.
According to CRISIL data, the AUM of equity funds in direct plans was Rs 4,400 crore in June quarter, which is 2% of the total assets in equity funds. However, institutional investors shifted to direct plans in a big way. CRISIL data shows that investments in direct plans of liquid funds touched Rs 1 lakh crore in June quarter from Rs 24,400 crore in March quarter. A large part of the shift in AUM in direct plans of debt funds is from institutional investors. Direct investments AAUM touched Rs 2.14 lakh crore in April-June 2013, up 70% from Rs 1.27 lakh crore over the March quarter.
Platforms such as iFAST and fundsindia don’t have a provision for their sub-brokers to facilitate direct plans since they don’t get the feeds. “Direct schemes are not available on our platform for sub-brokers. We don’t get reverse feeds,” said Chandrashekhar of FundsIndia.
Some investment advisers registered with SEBI are only recommending direct plans to their clients. “I only recommend direct plans to my clients unless they prefer to invest through a broker for their convenience. The performance of direct plans can be tracked by the investor through CAMS or Karvy mail back services,” said Kavitha Menon, a Mumbai based SEBI registered Investment Adviser.
